Ch 1 - Establishing And Monitoring Contract Type · Ch 1 - Establishing And Monitoring Contract...

Ch 1 - Establishing And Monitoring Contract Type

bull 10 - Chapter Introduction bull 11 - Matching Contract Type to Contract Risk bull 12 - Utilizing Fixed-Price Economic Price Adjustment

Contracts o 121 - Establishing Terms And Conditions For

Economic Price Adjustment o 122 - Making an Economic Price Adjustment Using

Cost Indexes bull 13 - Structuring And Applying Incentive Pricing

Arrangements o 131 - Structuring A Cost Incentive Pricing

Arrangement o 132 - Applying a Cost Incentive Pricing

Arrangement bull 14 - Structuring and Applying Award-Fee Pricing

Arrangements o 141 - Structuring an Award-Fee Pricing

Arrangement o 142 - Applying an Award-Fee Pricing Arrangement

bull 15 - Structuring a Fixed-Price Redeterminable Pricing Arrangement

bull Appendix 1A - Performance Evaluation Criteria bull Appendix 1B - Contractor Performance Evaluation Report

10 Chapter Introduction

When used in this chapter the terms contract type and type of contract refer to the contract compensation arrangement The contract compensation arrangement is the method of determining the dollars due to the contractor under the contract In this chapter you will learn about the development and application of common compensation arrangements

11 Matching Contract Type To Contract Risk

Points to Consider (FAR 16103) Contract type selection is the principal method of allocating cost risk between the Government and the contractor There is no single contract type that is right for every contracting situation Selection must be made on a case-by-case basis considering

contract risk incentives for contractor performance and other factors such as the adequacy of the contractors accounting system Your objective should be to select a contract type that will result in reasonable contractor risk with the greatest incentive for efficient and economical contract performance Selecting the proper contract type will make the work more attractive to more potential offerors thereby increasing competition

As you match contract type to contract risk consider the following

bull Identify available contract types bull Consider acquisition method bull Consider commerciality of the requirement bull Consider cost risk associated with the contract

action bull Consider appropriate performance incentives bull Consider the accounting system adequacy and bull Document the selection decision

Identify Available Contract Types The table on the following pages compares the most common compensation arrangements Most of those arrangements fit into two general categories fixed-price and cost-reimbursement but labor-hour and time-and-materials contracts have characteristics of both

bull Fixed-Price (FAR Subpart 162) Under a fixed-price contract the contractor agrees to deliver the product or service required at a price not in excess of the agreed-to maximum Fixed-price contracts should be used when the contract risk is relatively low or defined within acceptable limits and the contractor and the Government can reasonably agree on a maximum price Contract types in this category include

o Firm fixed-price (FFP) o Fixed-price economic price adjustment (FPEPA) o Fixed-price award-fee (FPAF) o Fixed-price incentive firm (FPIF) o Fixed-price incentive with successive targets

(FPIS) o Fixed-price contract with prospective price

redetermination (FPRP) o Fixed-ceiling-price contract with retroactive

price redetermination (FPRR)

o Firm fixed-price level of effort term contract (FFPLOE)

bull Cost-Reimbursement (FAR Subpart 163) Under a cost-reimbursement contract the contractor agrees to provide its best effort to complete the required contract effort Cost-reimbursement contracts provide for payment of allowable incurred costs to the extent prescribed in the contract These contracts include an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor cannot exceed (except at its own risk) without the approval of the contracting officer Contract types in this category include

o Cost (CR) o Cost-sharing (CS) o Cost-plus-fixed-fee (CPFF) o Cost-plus-award-fee (CPAF) o Cost-plus-incentive-fee (CPIF)

bull Labor-Hour and Time-and-Materials (FAR Subpart 166) There are two other types of compensation arrangements that do not completely fit the mold of either fixed-price or cost-reimbursement contracts Labor-hour and time-and-materials contracts both include fixed labor rates but only estimates of the hours required to complete the contract They are generally considered to most resemble cost-reimbursement contracts because they

o Do not require the contractor to complete the required contract effort within an agreed-to maximum price and

o Pay the contractor for actual hours worked

Comparison of Major Contract Types

Firm Fixed-Price (FFP)

Fixed-Price Economic Price Adjustment (FPEPA)

Fixed-Price Incentive

Firm (FPIF)

Fixed-Price Award-fee (FPAF)

Fixed-Price Prospective

Redetermination (FPRP)

Principal Risk to be Mitigated

None Thus the contractor assumes all cost risk

Unstable market prices for labor or material over the life of the contract

Moderately uncertain

contract labor or material requirements

Risk that the user will not be fully satisfied because of judgmental acceptance criteria

Costs of performance after the first year because they cannot be estimated with confidence

Use When The requirement is

The market prices at risk are severable

A ceiling price can be established

Judgmental standards can be fairly

The Government needs a firm commitment from

well-defined

Contractors are experienced in meeting it

Market conditions are stable

Financial risks are otherwise insignificant

and significant The risk stems from industry-wide contingencies beyond the contractors control The dollars at risk outweigh the administrative burdens of an FPEPA

that covers the most probable risks inherent in the nature of the work The proposed profit sharing formula would motivate the contractor to control costs to and meet other objectives

applied by an Award-fee panel The potential fee is large enough to both

Provide a meaningful incentive

Justify related administrative burdens

the contractor to deliver the supplies or services during subsequent years The dollars at risk outweigh the administrative burdens of an FPRP

Elements A firm fixed-price for each line item or one or more groupings of line items

A fixed-price ceiling on upward adjustment and a formula for adjusting the price up or down based on

Established prices

Actual labor or material costs

Labor or material indices

A ceiling price

Target cost

Target profit

Delivery quality andor other performance targets (optional)

Profit sharing formula

A firm fixed-price

Standards for evaluating performance

Procedures for calculating a fee based on performance against the standards

Fixed-price for the first period

Proposed subsequent periods (at least 12 months apart)

Timetable for pricing the next period(s)

Contractor is Obliged to

Provide an acceptable deliverable at the time place and price specified in the contract

Provide an acceptable deliverable at the time and place specified in the contract at the adjusted price

Provide an acceptable deliverable at the time and place specified in the contract at or below the ceiling price

Perform at the time place and the price fixed in the contract

Provide acceptable deliverables at the time and place specified in the contract at the price established for each period

Contractor Incentive (other than maximizing goodwill) 1

Generally realizes an additional dollar of profit for every dollar that costs are


Realizes a higher profit by completing the work below the ceiling

Generally realizes an additional dollar of profit for every dollar that costs

For the period of performance realizes an additional dollar of profit for every dollar

reduced reduced price andor by meeting objective performance targets

are reduced earns an additional fee for satisfying the performance standards

that costs are reduced

Typical Application

Commercial supplies and services

Long-term contracts for commercial supplies during a period of high inflation

Production of a major system based on a prototype

Performance-based service contracts

Long-term production of spare parts for a major system

Principal Limitations in FAR Parts 16 32 35 and 52

Generally NOT appropriate for RampD

Must be justified

Must be justified Must be negotiated Contractor must have an adequate accounting system Cost data must support targets

Must be negotiated

MUST be negotiated Contractor must have an adequate accounting system that supports the pricing periods Prompt redeterminations

Variants Firm Fixed-price Level of Effort

Successive Targets

Retroactive Redetermination

1 Goodwill is the value of the name reputation location and intangible assets of the firm


Cost-Plus Incentive-Fee (CPIF)

Cost-Plus Award-Fee (CPAF)

Cost-Plus Fixed-Fee (CPFF)

Cost or Cost- Sharing (C or CS)

Time amp

Materials (TampM)


Highly uncertain and speculative labor hours labor mix andor material requirements (and other things) necessary to perform the contract The Government assumes the risks inherent in the contract -benefiting if the actual cost is lower than the expected cost-losing if the work cannot be completed within the expected cost of performance

Use When An objective relationship can be established between the fee and such measures of

Objective incentive targets are not feasible for critical aspects of performance

Relating fee to performance (eg to actual costs) would be

The contractor expects substantial compensating benefits for absorbing

No other type of contract is suitable (eg because costs are

performance as actual costs delivery dates performance benchmarks and the like

Judgmental standards can be fairly applied1 Potential fee would provide a meaningful incentive

unworkable or of marginal utility

part of the costs andor foregoing fee or

The vendor is a non-profit entity

too low to justify an audit of the contractors indirect expenses)

Elements Target cost

Performance targets (optional)

A minimum maximum and target fee

A formula for adjusting fee based on actual costs andor performance

Target cost


A base and maximum fee

Procedures for adjusting fee based on performance against the standards

Target cost

Fixed fee

Target cost

If CS an agreement on the Governments share of the cost

No fee

A ceiling price

A per-hour labor rate that also covers overhead and profit

Provisions for reimbursing direct material costs


Make a good faith effort to meet the Governments needs within the estimated cost in the Schedule

Make a good faith effort to meet the Governments needs within the ceiling price

Contractor Incentive (other than maximizing goodwill)1

Realizes a higher fee by completing the work at a lower cost andor by meeting other objective performance targets

Realizes a higher fee by meeting judgmental performance standards

Realizes a higher rate of return (ie fee divided by total cost) as total cost decreases

If CS shares in the cost of providing a deliverable of mutual benefit

Typical Application Research and development of the prototype for a major system

Large scale research study

Research study

Joint research with educational institutions

Emergency repairs to heating plants and aircraft engines

Principal The contractor must have an adequate accounting Labor rates

Limitations in FAR Parts 16 32 35 and 52

system The Government must exercise surveillance during performance to ensure use of efficient methods and cost controls Must be negotiated Must be justified Statutory and regulatory limits on the fees that may be negotiated Must include the applicable Limitation of Cost clause at FAR 52232-20 through 23

must be negotiated MUST be justified The Government MUST exercise appropriate surveillance to ensure efficient performance

Variants Completion or Term

Labor Hour (LH)

Consider Acquisition Method (FAR 14104 16102 and DFARS 216403-70) The acquisition method selected for a particular acquisition may limit the available choice of contract type

bull Simplified Acquisition When using simplified acquisition procedures purchase orders are normally firm fixed-price You may use an unpriced order in certain situations when it is impossible to obtain firm pricing prior to issuing the purchase order Whenever you use an unpriced order the order must include a dollar limit on the Governments obligation and the contracting officer must follow-up to assure timely pricing

bull Sealed Bidding When using sealed bidding procedures o You will normally use a firm fixed-price

contract o You may use a fixed-price contract with economic

price adjustment if the contracting officer determines (in writing) what type of contract is necessary to protect the contractor and the Government against significant fluctuations in labor or material costs or to provide for contract price adjustments in the event of changes in the contractors established prices

o You must not use any other contract type bull Negotiation When using the negotiation procedures

prescribed in FAR Part 15 o You may use any contract type or combination of

contract types that will promote the best interests of the Government as long as you meet the specific limitations in FAR Part 16

o You must not use any contract type not prescribed in the FAR unless authorized by agency regulation or a FAR deviation

Consider Commerciality of the Requirement (FAR 12207) When acquiring a commercial item

bull You normally should use a firm fixed-price contract bull You may use a fixed-price contract with economic price

adjustment if the contracting officer determines (in writing) what type of contract is necessary to protect the contractor and the Government against significant fluctuations in labor or material costs or to provide for contract price adjustments in the event of changes in the contractors established prices

bull You must not use any other contract type in acquiring commercial items

Consider Cost Risk (FAR 16103(a)) Encourage contractors to accept reasonable cost risks of contract performance However requiring contractors to accept unknown or uncontrollable cost risk can endanger contract performance substantially reduce competition andor substantially increase contract price To realistically choose the proper contract type to meet a specific contract situation you must consider the proper allocation of cost risk

Cost estimates whether they are the offerors proposed or the Governments recommended are point estimates In all contracts involving forward pricing the point estimate is a projection of what the estimator believes is most likely to happen Since things rarely happen exactly as predicted there is usually some variation between projected and actual cost The greater the potential variability between the projected and actual cost the greater the cost risk

Quantitative analysis techniques can provide invaluable information about the distribution of values around the most likely future cost For example consider the confidence interval when your estimate is based on sampling analysis and the prediction interval when your estimate is based on regression analysis However use this information wisely If the variance is large attempt to determine why the interval is so large and what can be done to narrow it before you select a contract type to share the risk

As a minimum your appraisal of cost risk should consider two areas of particular concern contract performance risk and market risk

bull Performance Risk Most contract cost risk is related to contract requirements and the uncertainty surrounding contract performance The lower the uncertainty the lower the risk Therefore your appraisal of cost risk should begin with an appraisal of performance risk For larger more complex contracts you will likely need assistance from other members of the Government Acquisition Team (eg representatives from the requiring activity engineering staff contracting and programproject management)

o Areas that you consider should include o Stability and clarity of the contract

specifications or statement of work o Type and complexity of the item or service being

purchased o Availability of historical pricing data o Prior experience in providing required supplies

or services o Urgency of the requirement o Contractor technical capability and financial

responsibility and o Extent and nature of proposed subcontracting o The figure below depicts what happens as the

contract requirement becomes better defined

COST RISK AND CONTRACT TYPE Cost Risk High _________________________________________________ LowRequirement Definition

Vague ________________________________ Well-defined

Production Stages

Concept Studies amp Basic

Research

Exploratory Development

Test

Demonstration

Full-scale Development

Full Production

Follow-on Production

Contract Type

Varied CPFF CPIF FPIF CPIF FPIF or FFP

FFP FPIF or FPEPA

FFP FPIF or FPEPA

o Performance risk should be reduced from a high to a relatively low level as the requirement progresses from vague to well-defined and experience with the product increases

o Research and development contracts generally have a rather high performance risk This is due to

the factor of ill-defined requirements that arise from the necessity to deal beyond or at least very near the upper limits of current technology (ie the state of the art)

o Follow-on production contracts generally have a relatively low performance risk Requirements are well known there is a cost history to draw on contractors have experience producing the product etc

o As performance risk changes so should contract type Note that cost-reimbursement time amp materials or labor-hour contracts are generally associated with higher-risk requirements and fixed-price contracts are generally associated with lower-risk requirements

bull Market Risk Changes in the marketplace will also affect contract costs Preferred acquisition practice calls for forward pricing of contract efforts because forward pricing provides a baseline which you and the contractor can use to measure cost or price performance against contract effort

o Forward pricing requires the contracting parties to make assumptions about future changes in the marketplace A volatile market will increase the cost risk involved in contract pricing particularly when the contract period will extend several years What will material and labor cost two years from now Will material shortages occur two years from now In cases where these unknown costs are significant contract period risk becomes an important consideration in selection of contract type

o Fixed-price contracts with economic price adjustment for example are designed specifically to reduce this risk for contractors

Consider Appropriate Performance Incentives (FAR 16103(b)) Select the contract type (or combination of types) that will appropriately motivate contract performance

bull When the risk involved is minimal or can be predicted with an acceptable degree of certainty use a firm fixed-price contract because it best utilizes profit to motivate efficient contract performance and cost control

bull When there is no reasonable basis for firm pricing consider other contract types Using a firm fixed-price contract may limit competition encourage inflated contract pricing and efforts to control costs may actually hamper effective contract performance

Consider Accounting System Adequacy (FAR 16104(h)) Before agreeing on a contract type other than firm fixed-price you must ensure that the contractors accounting system will permit timely development of all necessary cost data in the form required for the proposed contract type A careful account system review is particularly important when the contractors only experience has been with firm fixed-price contracts

Document the Selection Decision (FAR 16103(d)) Assure that the contract file contains documentation showing why the particular contract type was selected unless you are

bull Making a fixed-price acquisition using simplified acquisition procedures

bull Using a firm fixed-price contract for any requirement other than major systems acquisition or research and development or

bull Awarding the set-aside portion of a sealed bid partial set-aside for small business

12 Utilizing Fixed-Price Economic Price Adjustment Contracts

This section will examine procedures for establishing a fixed-price economic price adjustment contract (FPEPA) and the procedures for making price adjustments using one type of FPEPA contract

bull 121 - Establishing Terms And Conditions For Economic Price Adjustment

bull 122 - Making An Economic Price Adjustment Using Cost Indexes

General Characteristics (FAR 16203) A fixed-price with economic price adjustment (FPEPA) contract is designed to cope with the economic uncertainties that threaten long-term fixed-price arrangements The economic price

adjustment (EPA) provisions provide for both price increases and decreases to protect the Government and the contractor from the effects of economic changes

Situations for Use (FAR 16203-2) You may use an FPEPA contract in sealed bidding or negotiation when both of the following conditions exist

bull There is serious doubt concerning the stability of market or labor conditions that will exist during an extended period of contract performance

o Volatility of the markets for labor and material The more volatile the market the greater the benefits that can be derived from FPEPA utilization

o Projected contract period The longer the contract the greater the contractors exposure to an uncertain market FPEPA contracts are normally not used for contracts that will be completed within six months of contract award

o The amount of competition expected If markets are truly volatile many firms may be unwilling to submit an offer without EPA protection

o Dollar value of the contract The greater the cost risk to the contractor the greater the benefits that can be derived from an FPEPA contract In the DoD adjustments based on actual labor or material cost are generally not used for contracts of $50000 or less (DFARS 216 203-4(c))

bull Contingencies that would otherwise be included in the contract price can be identified and covered separately in the contract

Limitations on Use (FAR 16203-3) You must not use an FPEPA contract unless you have determined that it is necessary for one of the following reasons

bull To protect the contractor and the Government against significant fluctuations in labor or material costs

bull To provide for contract price adjustment in the event of changes in the contractors established prices

121 Establishing Terms And Conditions For Economic Price Adjustment

Establishing the Base for Adjustment (FAR 16203-2) When establishing a base for adjustment ensure that contingency allowances are not duplicated by inclusion in both the base price and the adjustment requested by the contractor under the EPA provision

If you do not require cost or pricing data obtain adequate information to establish the base level from which adjustment will be made If necessary you may require verification of the data submitted

EPA Clauses in Negotiated Contracts (FAR 16203-4) The key provision in an FPEPA contract is the EPA clause FAR identifies the four types of economic price adjustment presented in the table below In developing an FPEPA contract you can choose from the FAR EPA clauses use an agency-prescribed clause or develop your own unique clause following agency guidelines For commercial items consider market research and commercial practice in clause development

When you are contracting by negotiation and an FPEPA contract is appropriate

Consider adjustment based on

When the following requirements are met

And adjustment can follow the requirements of

Established Prices for Standard Supplies

bull A fixed-price contract is contemplated

bull Contract is for standard supplies with an established catalog or market price

bull If the contract unit price reflects a net price after applying a trade discount from a catalog or list price you must document both the catalog or list price and the discount

bull Economic Price Adjustment- Standard Supplies (FAR 52216-2) or

bull An agency-prescribed EPA clause if you determine that use of the above provision is inappropriate (eg DFARS 252216-7000 Economic Price Adjustment-Basic Steel Aluminum Brass Bronze or Copper Mill

Products)

Established Prices of Semistandard Supplies


bull The contract is for semistandard supplies with prices that can be reasonably related to the prices of nearly equivalent standard supplies with an established catalog or market price

bull If the contract unit price reflects a net price after applying a trade discount from a catalog or list price you can document both the catalog or list price and the discount

bull Before contract award you must reach agreement in writing with the contractor on the identity of the standard item related to each line item

bull Note If the supplies are standard except for preservation packaging and packing use the Standard Supplies provision above

bull Economic Price Adjustment- Semistandard Supplies (FAR 52216-3) or

bull An agency-prescribed EPA clause if you determine that use of the above provision is inappropriate

Actual Cost of Labor or Material


bull No major design engineering or development is involved

bull One or more identifiable labor or material cost factors is subject to change

bull The contract Schedule must describe in detail

bull Types of labor and materials subject to adjustment under the provision

bull Labor rates including fringe benefits that may be increased or decreased

bull Quantities of the specified

bull Economic Price Adjustment- Labor and Material (FAR 52216-4) or

bull An agency-prescribed EPA clause if you determine that use of the above provision is inappropriate (eg DFARS 252216-7001 Economic Price

labor and materials allocable to each unit to be delivered under the contract

bull When negotiating adjustments under the contract you must be able to

bull Consider work in process and materials on hand at the time of changes in labor rates including fringe benefits

bull Not adjust any indirect costs except fringe benefits

bull Consider only fringe benefits specified in the contract Schedule

Adjustment- Nonstandard Steel Items)

PriceCost Indexes for Labor or Material

bull The contract involves an extended performance period with significant costs beyond one year

bull Contract amount subject to adjustment is substantial

bull Labor and material prices are too unstable to permit reasonable division of risk between the contractor and the Government without an EPA clause

EPA clause prepared and approved following agency procedures

EPA Provisions in Sealed Bidding (FAR 14408-4) In sealed bidding you cannot negotiate the terms of an EPA clause When you prepare the invitation for bids (IFB) the contract clause must be established in a way that is compatible with the requirements of the sealed bidding process

When an IFB contains an economic price adjustment clause and

Then

No bidder takes exception to the clause

Evaluate bids on the basis of the quoted prices without adding the allowable EPA

A bidder increases the maximum percentage of EPA stipulated in the invitation or limits the

Reject the bid as nonresponsive

downward EPA provisions of the IFBA bid deletes the EPA clause Reject the bid as nonresponsive

because downward adjustment is limited by the deletion

A bidder decreases the maximum percentage of EPA stipulated in the invitation

bull Evaluate bids at the base price

bull If the bidder with the reduced ceiling is in position to receive award the award must reflect the lower ceiling

When an IFB does not contain an economic price adjustment clause but a bidder proposes one

Then

With a ceiling that the price will not exceed

bull Evaluate the bid on the basis of the maximum possible EPA of the quoted price

bull If the bid is eligible for award request the bidder to agree to the inclusion in the contract of an approved EPA clause subject to the same ceiling

bull If the bidder will not agree to an approved clause award may be made based on the original bid

Without a ceiling that the price will not exceed

Reject the bid unless there is a clear basis for evaluation

Developing an EPA Clause Based on Cost Indexes (DFARS 216203-4(d)) When you develop an EPA clause based on cost indexes for labor or material the clause must be prepared and approved in accordance with agency procedures Assure that the clause

bull Is not unnecessarily complex bull Accurately identifies the index(es) which will be used

in making adjustments

o Normally you should not use more than two indexes one for labor (direct and indirect) and one for material (direct and indirect)

o The index should encompass a large sample of relevant items while still bearing a logical relationship to the type of contract costs being adjusted

o Commonly used indexes include the following series published by the US Department of Labor Bureau of Labor Statistics (BLS)

o Producer Price Index for industrial commodities o Employment Cost Index for wages and salaries

benefits and compensation costs for aerospace industries

o Wages and Income Series by Standard Industrial Classification (SIC)

o If no single index relates directly to the costs to be adjusted you may need to develop a composite index

bull Clearly identifies a base index period comparable to the base contract period for adjustment

bull Clearly identifies events that will trigger price adjustments

o Adjustments should be frequent enough to afford the contractor appropriate economic protection without creating a burdensome administrative effort

o Normally the adjustment period should range from quarterly to annually

bull States the percentage of the base price that is subject to adjustment Normally you should

o Not apply adjustments to the profit portion of contract price Obtain adequate information from the contractor and other sources to assure that the baseline is reasonable

o Exclude any areas of cost that do not require adjustment such as firm fixed-price subcontracts areas of overhead that should remain relatively stable (eg depreciation) labor costs covered by a union agreement and other costs not likely to be affected by changes in the economy

o Allocate the portions of contract price subject to adjustment to specific periods of time (eg quarterly) based on the most probable pattern of expenditure or commitment (expenditure profile)

o State that the portion of contract price subject to adjustment must not be modified except in the event of significant changes in contract scope

bull Reasonably provides for potential economic fluctuations within the original contract period including options Do not provide for an adjustment beyond the original contract period including options

bull Clearly identifies any limits on adjustment ceiling on upward adjustments or floor on downward adjustments Normally you should not include a ceiling or a floor for adjustment unless the adjustment is based on indexes below the four digit level of the BLS indexes identified above

bull Clearly identifies any minimum change required to trigger adjustment For example the contract could state that No adjustment will be made unless the index indicates a price change of 2 percent or more from base period prices However if the index does indicate an increase or decrease of more than 2 percent the adjustment will consider the full amount of the change for the portion of contract price indicated in the contract

bull Clearly identifies any requirement for the prime contractor to extend EPA coverage to subcontractors to assure a proper allocation of risk

bull Clearly states how EPA adjustments will be considered in applying any cost incentives included in the contract Normally a contract which includes a cost incentive provision should provide that any sums paid to the contractor because of EPA provisions must be subtracted from the total allowable costs for the purpose of establishing the total costs to which the provision applies

bull Clearly state how the pricing of contract modifications will be affected by the EPA provisions Normally modifications are priced as though the EPA provision did not exist

122 Making An Economic Price Adjustment Using Cost Indexes

Steps for Making an Economic Price Adjustment When you have developed and awarded an FPEPA contract based on cost index(es) you must administer the EPA provisions as

presented in the contract In general the adjustment process will follow a 5-step procedure

Step 1 Identify the index(es) which will be used in making adjustments

Step 2 Identify the base period and times or events that will trigger price adjustments

Step 3 Identify the percentage of the base price subject to adjustment

Step 4 Identify any limits on adjustment

Step 5 Calculate the adjusted price

Where

I1 = Index for Base Period

I2 = Index for Adjustment Period

S = Percentage of Price Subject to Adjustment

P = Base Unit Contract Price

Example of an Economic Price Adjustment The following example demonstrates the application of the above steps in making a contract price adjustment for a manufactured item In the example an EPA clause was included in the contract awarded in December 19X1 for deliveries during calendar year 19X2 An estimated 25 percent of the contract price is related to the market price of silver and fluctuations in the market make it extremely difficult to estimate costs over the next year

Step 1 Identify the index(es) which will be used in making adjustments The contract states that price adjustments will be made using the Producer Price Index (PPI) for silver bar refined 999 fine (PPI 1022-0272)

Step 2 Identify the base period and times or events that will trigger price adjustments The contract provides for

adjustment consideration using the April 19X2 index for scheduled second quarter deliveries the July 19X2 index for scheduled third quarter deliveries and the October 19X2 index for scheduled fourth quarter deliveries The base period for adjustment purposes is December 19X1 The calculation presented below is for the 5000 units scheduled for delivery during the second quarter of 19X2

Step 3 Identify the percentage of the base price subject to adjustment The EPA clause states that 25 percent of the contract unit price is subject to adjustment The unadjusted contract unit price is $200 per unit That means that $50 of the unit price is subject to adjustment and $150 is not

Step 4 Identify any limits on adjustment Because of the extreme volatility of the silver market the EPA clause does not include a limit on any adjustment

Step 5 Calculate the adjusted price Adjust the price using the index for April 19X2 when

I1 = Index for Base Period = 450 in December 19X1

I2 = Index for Adjustment Period = 675 in April 19X2

S = Percentage of Price Subject to Adjustment = 25

P = Base Unit Contract Price = $200

The total price for the 5000 units scheduled for delivery during the second quarter is $1125000 The economic price adjustment is a $125000 increase

13 Structuring And Applying Incentive Pricing Arrangements

This section examines procedures for structuring and applying incentive pricing arrangements

bull 131 - Structuring A Cost Incentive Pricing Arrangement

bull 132 - Applying A Cost Incentive Pricing Arrangement

General Characteristics (FAR 16401 and 16402) Incentive contracts are designed to attain specific acquisition objectives by positively rewarding identified contractor achievements exceeding stated target(s) and negatively rewarding contractor failures to attain stated targets Profitfee will increase when target(s) are surpassed They will decline when target(s) are not achieved Changes in profitfee will follow an agreed-to formula-type incentive arrangement

Contracts may include

bull Cost Incentives Most incentive contracts include only an incentive for controlling cost You cannot provide for other incentives without also providing a cost incentive or constraint

bull Performance Incentives Consider technical performance incentives in connection with specific product characteristics or other specific elements of contract performance When a variety of specific characteristics contribute to the overall contract performance you must balance the incentives so that no one of them is exaggerated to the detriment of

ormance overall contract perfbull Delivery Incentives Consider delivery incentives when

improvement from a required delivery schedule is a significant Government objective Delivery incentives should specify the application of the incentive structure in the event of delays beyond the control and without the fault or negligence of the contractor or subcontractor

If you use multiple incentives structure them in a manner that compels trade-off decisions among the incentive areas Be careful to avoid using too many incentives If there are too many incentives it may be impossible for the

contractor to logically consider the trade-offs available and determine the effect on profitfee

Types of Incentive Contracts (FAR Subpart 164) There are three types of incentive contracts that provide for changes in profitfee following an agreed-to formula-type incentive arrangement the fixed-price incentive firm target (FPIF) fixed-price incentive successive targets (FPIS) and cost-plus-incentive-fee (CPIF) Because the FPIF and CPIF contracts are used much more frequently than FPIS contracts the remainder of this section will concentrate on the development of those pricing arrangements

There two other incentive contracts described in the FAR -- the cost-plus-award-fee (CPAF) contract and the fixed-price contract with award fee (FPAF) These contract types are not examined in this section because award-fee incentives are not based on any type of formula arrangement They are examined in a later section of the chapter

Situations for FPIF Contract Use (FAR 16403 and 16403-1(b)) An FPIF contract is appropriate when

bull A firm fixed-price contract is not suitable bull The nature of the supplies or services being acquired

and other circumstances of the acquisition are such that the contractors assumption of a degree of cost responsibility will provide a positive profit incentive for effective cost control and performance

bull The parties can negotiate (at the outset) a firm target cost target profit and profit adjustment formula that will provide a fair and reasonable incentive and a ceiling that provides for the contractor to assume an appropriate share of the risk

bull If the contract also includes incentives on technical performance andor delivery the performance requirements provide a reasonable opportunity for the incentives to have a meaningful impact on the contractors management of the work

Limitations on FPIF Contract Use (FAR 16403-1(c)) Do not use an FPIF contract unless

bull The contractors accounting system is adequate for providing data to support negotiation of final cost and incentive price revision and

bull Adequate cost or pricing information is available for establishing reasonable firm targets at the time of initial contract negotiation

Situations for CPIF Contract Use (FAR 16405-1(b)) A cost-plus-incentive-fee contract is appropriate for noncommercial service or development and test programs when

bull A cost-reimbursement contract is necessary bull The parties can negotiate a target cost and a fee

adjustment formula that are likely to motivate the contractor to manage effectively

o The fee adjustment formula should provide an incentive that will be effective over the full range of reasonably foreseeable variations from target cost

o If a high maximum fee is negotiated the contract shall also provide for a low minimum fee that may be a zero fee or in rare cases a negative fee

bull The contract may include technical performance incentives when it is highly probable that the required development of a major system is feasible and the Government has established its performance objectives at least in general terms

Limitations on CPIF Contract Use (FAR 16405-1(c)) Do not use a CPIF contract unless

bull The contractors accounting system is adequate for determining costs applicable to the contract and

bull Appropriate Government surveillance during performance will provide reasonable assurance that efficient methods and effective cost controls are used

bull

131 Structuring A Cost Incentive Pricing Arrangement

Basic Elements of Incentive Arrangement (FAR 16402-1(b)) The basic elements of the cost incentives in CPIF contracts and the FPIF contracts are compared in the table below Note that the first three elements are similar for both contract types

Contract Elements FPIF Contract CPIF Contract

Target Cost

Target Profit

Profit Adjustment Formula

Price Ceiling

Target Cost

Target Fee

Fee Adjustment Formula

Minimum Fee

Maximum Fee

Target Cost Both FPIF contracts and CPIF contracts have a target cost If the contractor completes the contract at the target cost there will be no positive or negative cost incentives applied

What is a good target cost The target cost should be the most likely contract cost You and the contractor must reach agreement on target cost based on judgment and the facts available at the time of contract negotiation

Target ProfitFee Profit is the difference between cost and price for the FPIF contract

Fee is the difference between cost and price in the CPIF contract Target profitfee is the difference between cost and price at target cost

Your profitfee objective should be based on the results of your analysis using your agencys structured approach to profitfee analysis

ProfitFee Adjustment Formula The profit adjustment formula of the FPIF contract and fee adjustment formula of the CPIF contract have a similar purpose -- to adjust profitfee as cost increases or decreases A single contract can have one adjustment formula for all levels of cost or there may be more than one (eg one above target cost and one below target cost)

The adjustment formula represents the allocation of cost risk between the Government and the contractor The adjustment formula is normally described as a share ratio written as

SGSC

Where

SG = Percentage of cost risk assumed by the Government

SC = Percentage of cost risk assumed by the contractor

The two parts (SG + SC) of the ratio must always total 100 percent of the cost risk (eg 7030) A 7030 share ratio means that the Government accepts 70 percent of the cost risk and the contractor accepts 30 percent A 6040 share ratio means that the Government accepts 60 percent of the cost risk and the contractor accepts 40 percent

Steps for Developing an Adjustment Formula You should develop the contract adjustment formula based on an analysis of the reasonable changes in profitfee over the range of probable costs Consider the following steps as you develop the share ratio for adjustment calculations

Step 1 Develop a target cost objective as described above

Step 2 Develop a target profitfee objective as described above

Step 3 Develop a pessimistic cost estimate The target cost is only one cost in the range of reasonable costs The pessimistic cost should be an estimate of the highest cost that you would consider probable based on the information available at the time of contract negotiation

bull Quantitative analysis techniques can provide invaluable information for you to use in estimating the pessimistic cost For example consider the high side of the confidence interval when your estimate is based on sampling analysis and the high side of the prediction interval when your estimate is based on regression analysis

o If the pessimistic cost is very high relative to the estimate the risk may be too great for an incentive contract You may need to consider another contract type (eg a cost-plus-fixed-fee contract)

Step 4 Develop an estimate of an appropriate profitfee if costs reached the pessimistic cost

estimate In your analysis consider the target profitfee objective and the quality of contractor effort required to limit costs to the pessimistic cost estimate

Step 5 Develop an optimistic cost estimate The optimistic cost should be an estimate of the lowest cost that you would consider probable based on the information available at the time of contract negotiation

o Quantitative analysis techniques can provide invaluable information for you to use in estimating the optimistic cost For example consider the low side of the confidence interval when your estimate is based on sampling analysis and the low side of the prediction interval when your estimate is based on regression analysis

o There is no reason that the difference between target cost and the optimistic cost must be equal to the difference between target cost and pessimistic cost If fact the two will normally not be equal

Step 6 Develop an estimate of an appropriate profitfee if costs were limited to the optimistic cost estimate In your analysis consider the target profitfee objective and the quality of contractor effort required to limit costs to the optimistic cost estimate

Step 7 Calculate the under-target share ratio

o Calculate contractor share Use the following formula to calculate the contractors percentage share of cost risk

Where

SCU = Contractor percentage share of cost risk (This will be a negative number indicating that profitfee will go up as costs go down)

PT = Target profitfee

PO = Profitfee at optimistic cost estimate

CT = Target cost

CO = Optimistic cost estimate

o Calculate Government share Calculate the Government share of cost risk by subtracting the contractor share from 100 percent

SGU = 100 - SCU

Where

SGU = Government percentage share of cost risk

SCU = Contractor percentage share of cost risk

o Write the under-target share ratio in the form SGSC

Step 8 Calculate the over-target share ratio

o Contractor share Use the following formula to calculate the contractors percentage share of cost risk

Where

SCO = Contractor percentage share of cost risk (This will be a negative number indicating that profitfee will go up as costs go down)


PP = Profitfee at pessimistic cost estimate

CT = Target cost

CP = Pessimistic cost estimate

o Government share Calculate the Government share of cost risk by subtracting the contractor share from 100 percent

SGO = 100 - SCO

Where

SGO = Government percentage share of cost risk

SCO = Contractor percentage share of cost risk

o Write the over-target share ratio in the form SGOSCO

Example of Sharing Arrangement Formula Development You have analyzed a contractors proposal considering all available information As a result of your analysis you have completed Steps 1 through 6 of adjustment formula development and prepared the three positions presented in the table below You must now use this information to calculate the under target and over-target share ratios

Prenegotiation Estimates

Element

OptimisticMost Likely

(Target)

Pessimistic

Direct Material Cost

Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share

o Write the under-target share ratio as 7525


o Contractor share

o Government share

o Write the over-target share ratio as 7030 Note that the over-target share ratio and the under-target share ratio are not the same That is not unusual

Final Steps for Developing a CPIF Arrangement As you learned above the basic elements of the CPIF contract and the FPIF contract are quite similar Both have a target cost CPIF target fee and FPIF target profit are both

developed using structured profitfee analysis Both have sharing arrangements for costs over and under target

The differences between the CPIF and FPIF pricing arrangements occur when contract costs are substantially above or below target cost The CPIF contract pricing arrangement must include a minimum fee and a maximum fee that define the contract range of incentive effectiveness (RIE) When costs are above or below the RIE the Government assumes full cost risk for each additional dollar spent within the funding or cost limits established in the contract Consider the following final steps when developing a CPIF pricing arrangement

Step 9 Set the minimum fee No matter what fee you calculate using the share ratio the contractors actual fee cannot be less than the minimum fee stated in the contract In effect you are telling the contractor that the Government will accept the risk of contract cost exceeding the cost at the point where minimum fee is reached

o The pricing arrangement should be structured so that the minimum fee is reached at the pessimistic cost estimate

o The minimum fee may be zero but it should rarely be less than zero

Step 10 Set the maximum fee No matter what fee you calculate using the share ratio the contractors actual fee cannot be more than the maximum fee stated in the contract Logically the pricing arrangement should be structured so that the maximum fee is reached at the optimistic cost estimate

Example of CPIF Arrangement Development Use the proposal analysis in the following table to develop a contract pricing arrangement including target cost target fee under-target share ratio over-target share ratio maximum fee and minimum fee

CPIF Contract Prenegotiation Estimates

Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000

Steps 1-6 have been completed in the table above Note that

o Target cost should be the most likely cost -- $1000000

o Target fee -- the $70000 in the Most Likely Cost column in above table -- was developed using structured fee analysis


o Contractor share

o Government share



o Contractor Share

o Government Share

o Write the over-target share ratio as 875125

Step 9 Set the minimum fee Minimum fee should be the fee at the pessimistic cost That fee is $20000

Step 10 Set the maximum fee Maximum fee should be the fee at the optimistic cost That fee is $120000

CPIF Range of Incentive Effectiveness Whenever you develop a CPIF pricing arrangement assure that you know the range over which the cost incentives are effective The range of incentive effectiveness (RIE) is the range over which CPIF incentives can be expected to motivate contractor performance

The RIE is not identified in the contract but it is defined by the share ratio(s) minimum fee and maximum fee The cost incentive will be effective in the range between the cost point where the maximum fee is reached and the cost point where the minimum fee is reached -- the range between the optimistic cost estimate and the pessimistic cost estimate Beyond these points the contractor has no contract incentive to control cost because fee is fixed

In the example above we developed the following pricing arrangement

Target Cost $1000000

Target Fee $70000

Under-Target Share Ratio 7525

Over-Target Share Ratio 875125

Maximum Fee $120000

Minimum Fee $20000

The range of incentive effectiveness would be between the optimistic cost ($800000) and the pessimistic cost ($1400000) as shown in the figure below

CPIF Pricing Arrangement Note that the optimistic cost estimate and pessimistic cost estimate used to develop the pricing arrangement are not given in the terms of the pricing arrangement If a contractor had presented an offer which included the elements above you could calculate the offer RIE by using the following formulas to calculate the optimistic cost and pessimistic cost

Optimistic Cost

Pessimistic Cost

Where

CO = Optimistic cost

CT = Target cost

PT = Target fee

PO = Maximum fee (fee at the optimistic cost)

SCU = Contractor under-target share

Where

CP = Pessimistic cost

CT = Target cost

PT = Target fee

PP = Minimum fee (fee at the pessimistic cost)

SCO = Contractor over-target share

Example of Calculating CPIF Range of Incentive Effectiveness We can use the pricing arrangement above to calculate the optimistic and pessimistic costs used to develop the pricing arrangement

Step 1 Calculate the optimistic cost that is consistent with the pricing arrangement

$800000 is the optimistic cost estimate Note that is the number we used in developing the pricing arrangement

Step 2 Calculate the pessimistic cost that is consistent with the pricing arrangement

$1400000 is the pessimistic cost estimate (Note that is the number we used in developing the pricing arrangement)

Step 3 Use the calculated optimistic cost and the pessimistic cost to describe the RIE The RIE in this example would be $800000 to $1400000 Outside that range the proposed incentive arrangement would not incentivize the contractor to control costs

Example of FPIF Arrangement Development Use the proposal analysis in the following table to develop a contract pricing arrangement including target cost target profit under-target share ratio over-target share ratio and ceiling price

FPIF Contract Prenegotiation Estimates

Element

Optimistic

Most Likely

(Target)

Pessimistic Direct Material Cost

Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000


o Target cost should be the most likely cost $1000000

o Target profit -- the $100000 in the Most Likely Cost column in above table -- was developed using structured profit analysis


o Contractor share

o Government share



o Contractor Share

o Government Share


Note that for this contract the over-target and under-target share ratios happen to be the same but the range of dollars between target cost and the pessimistic estimate of probable cost is much larger than the range of dollars between the target cost and the optimistic estimate of probable cost

Final Steps for Developing a FPIF Arrangement The FPIF contract does not have a maximum profit the share ratio remains in effect throughout the range of under-target contractors share of any costs over or under target as calculated in Step 3

Step 5 If the fee calculated in Step 4 is more than the maximum fee or less than the minimum fee adjust it to the appropriate fee

No adjustment is required

Step 6 Add the final fee to final cost to determine final contract price

Step 7 Modify the contract using a bilateral contract modification to incorporate agreement on final cost and fee

The final contract price is $1157500

Steps for FPIF Contract Final Pricing (FAR 52216-16) Computation of the final price under an FPIF contract is very similar to computation of final price under a CPIF contract The major differences are that there are no

limits on profit and total price cannot exceed the contract ceiling price

Follow the steps below in calculating final FPIF contract price

Step 1 Review the contractors final cost proposal to develop a position on final contract cost

o Assure that the contractors final cost proposal includes all data required by the contract

o Develop a negotiation position based on Government audit recommendations and other available information

Step 2 Calculate the contractors share of any costs over or under target Use the final contract cost calculated in Step 1 target cost and the appropriate share ratio

Where

PA = Profit Adjustment

SC = Contractor percentage share of cost risk

CT = Target cost

CF = Final cost

Step 3 Adjust contract profit considering the contractors share of any costs over or under target as calculated in Step 2

Where

PF = Final Profit

PT = Target Profit

PA = Profit Adjustment (Remember that the profit adjustment may be positive or negative)

Step 4 Add the final profit to final cost to determine final contract price

Where

KF = Final price

CF = Final cost

PF = Final profit

Step 5 If the price calculated in Step 4 exceeds the contract ceiling price the final contract price will be the ceiling price

Step 6 Negotiate final contract price

o Use the results of Steps 1 through 5 as your objective in negotiating contract final cost If the contractor provides additional support that leads you to modify your position on final cost modify your position on final profit and price accordingly

o When you reach a agreement on final contract price modify the contract using a bilateral contract modification to incorporate agreement on final cost and profit

o If you cannot reach a final price agreement it may be necessary for you to issue a final decision under the contract Disputes clause

Step 7 Obtain a final invoice

Apply any deductions or withholdings and process the invoice for final payment

Example of FPIF Contract Final Pricing You and the contractor agree that the final cost on a FPIF contract is $1310000 Contract target cost is $1000000 target profit is $100000 ceiling price is $1325000 and the over-target share ratio is 7525


The contractor proposed a final contract cost of $1310000 Government review and your analysis did not identify any deficiencies

Step 2 Calculate the contractors share of any costs over or under target




Since the price in Step 4 exceeds the contract ceiling price the final contract price is the ceiling price $1325000


In this example negotiation should result in acceptance of the contractors proposed cost


Obtain a final invoice and process it for final payment

14 Structuring And Applying Award-Fee Pricing Arrangements

In this section we examine factors to consider in structuring and applying award-fee pricing arrangements

bull 141 - Structuring An Award-Fee Pricing Arrangement bull 142 - Applying An Award-Fee Pricing Arrangement

Award-Fee Concept (FAR 16405-2(a)) An award-fee contract is a form of incentive contract Unlike the FPIF or CPIF contract the award-fee contract does not include predetermined targets and automatic fee adjustment formulas Contractor performance is motivated by fee adjustments based on a subjective evaluation of contractor performance in areas such as quality timeliness technical ingenuity and cost-effective management

CPAF Contract Features (FAR 16405-2(a)) The most common award-fee contract is the cost-plus-award-fee (CPAF) contract

bull A CPAF contract provides for a fee consisting of o A base fee that is fixed at the time of contract

award and o An award-fee that the contractor may earn in

whole or in part during contract performance The award-fee must be large enough to motivate the contractor to excel in such areas as quality timeliness technical ingenuity and cost-effective management

bull At established points during contract performance the Government Fee Determining Official will evaluate contractor performance and determine the amount of award-fee that the contractor will receive from the available award-fee pool in accordance with criteria established in the contract The determination is made unilaterally by the Fee Determining Official

Situations for CPAF Contract Use (FAR 16405-2(b)(1)) Consider a CPAF contract when the following conditions exist

bull It is neither feasible nor effective to devise predetermined objective incentive targets applicable to cost technical performance or schedule

bull The likelihood of meeting acquisition objectives will be enhanced by using a contract that effectively motivates the contractor toward exceptional performance and provides the Government with the flexibility to evaluate both actual performance and the conditions under which it was achieved

bull Any additional administrative effort and cost required to monitor and evaluate performance are justified by the expected benefits

Restrictions on CPAF Contract Use (FAR 16405-2(c) and DFARS 216405-2(c)) In addition to restrictions applicable to all cost-reimbursement contracts FAR directs that CPAF contracts not be used unless the expected benefits are sufficient to warrant the additional administrative effort and cost involved

Your agency may provide additional restrictions For example DoD personnel must not use a CPAF contract

bull To avoid establishing a CPFF contract when the criteria for a CPFF contract apply or developing objective targets so that a CPIF contract can be used

bull For either engineering development or operational development acquisitions which have specifications suitable for simultaneous research and development and production However you may use a CPAF contract for individual engineering development or operational system development acquisitions in support of the development of a major weapon system or equipment where

o It is more advantageous to the Government and o The purpose of the acquisition is clearly to

determine or solve specific problems associated with the major weapon system or equipment

Situations for FPAF Contract Use (FAR 16404(a) and DFARS 216470) You may use award-fee provisions in fixed-price contracts when the Government wishes to motivate a contractor and other incentives cannot be used because contractor performance cannot be measured objectively Such contracts must

bull Establish a fixed price (including normal profit) for the effort This price will be paid for satisfactory contract performance Award fee earned (if any) will be paid in addition to that fixed price and

bull Provide for periodic evaluation of the contractors performance against an award-fee plan

Restrictions on FPAF Contract Use (FAR 16404(b) and DFARS 216470) Do not consider an FPAF unless the following conditions exist

bull The administrative costs of conducting award-fee evaluations are not expected to exceed the expected benefits

bull Procedures have been established for conducting the award-fee evaluation

bull The award-fee board has been established and bull An individual above the level of the contracting

officer approved the fixed-price-award-fee incentive

141 Structuring An Award-Fee Pricing Arrangement

Base Fee Objective for CPAF Contracts (FAR 15404-4(b)(1) DFARS 215404-74 and 216404-2(c)(2)(B))

Most agencies (including the DoD) exempt CPAF contracts from the requirement for application of the agencys structured approach to fee analysis

Accordingly you must subjectively develop your base fee objective for each contract considering the following guidelines

bull The base fee must not exceed prescribed agency limits (eg three percent of contract cost for DoD contracts)

bull The base fee should be large enough to provide the contractor with an adequate fee for rendering minimum acceptable performance but small enough to provide an award-fee pool that will provide the contractor with an adequate incentive to improve performance above minimum requirements

Award-Fee Objective The award-fee pool is meant to provide the contractor with an incentive to provide more than the minimum level of performance required by the contract Based on contract performance the contractor may earn all part or none of the available award-fee pool

As with base fee you must subjectively develop your award-fee objective The award-fee pool should be sufficient to motivate or reward the contractor at any level of performance above the minimum designated in the evaluation criteria Normally you should expect the sum of the base fee and the award-fee pool to exceed the fee objectives that would be provided under a CPFF contract

Contract Award-Fee Clauses (FAR 16406(e) and 52216-7)

FAR does not prescribe specific award-fee clauses instead it requires you to insert an appropriate award-fee clause in solicitations and contracts when a CPAF contract is contemplated

bull FAR requires that the clause o Be prescribed by or approved under agency

acquisition regulations o Be compatible with the Allowable Cost and Payment

clause and o Expressly exclude from the operation of the

Disputes clause any disagreement by the contractor concerning the amount of the award fee (However this wording does not negate the authority of Courts and Boards to overturn a decision that is arbitrary or capricious (see Burnside-Ott Aviation Training Center v John H Dalton Secretary of the Navy US-CT-APP-FC 41 CCF para77043))

bull In preparing the clause also consider the following o Base Fee o State the agreed-to amount o State how the base fee will be paid (eg equal

monthly installments) o Award-fee o State the total agreed-to amount o Include a provision for the prompt payment of

contractor-earned award-fee after each determination

o Award-fee Determination Process o The award-fee determination process need not be

spelled out in the contract or in an appendix to the contract Normally it is preferable to delineate the award-fee determination process in a comprehensive Award-Fee Plan that is identified in the contract

o State that the Fee Determining Official has the unilateral right to change the Award-Fee Plan except for conditions that otherwise require mutual agreement under the contract

o State that the contractor must receive notice of any change to the Plan by a specified number of work or calendar days prior to the beginning of the evaluation period to which the change will apply

bull Award-Fee Evaluations Award-fee evaluations should be timed so that the contractor will be periodically informed about performance quality and the areas in which improvement is expected (FAR 16405-2(b)(3)) Tie partial payment of fee to the evaluations

o If a program or project is involved the award-fee evaluation points should be tied to key program decision points

o If the contract is for a continuing effort (eg facility operation and maintenance) the award-fee evaluation points should be established periodically throughout the contract

Award-Fee Plan The Award-Fee Plan should comprehensively delineate the award-fee determination process

bull Organizational Structure for Award-fee Determination The plan should identify and define the responsibilities of personnel involved in the award-fee process The structure should be tailored to fit the contract situation However a three-tier structure is common

o Fee Determining Official The Fee Determining Official is responsible for

o Determining the award-fee earned and payable for each evaluation period

o Changing the matters covered by the Award-Fee Plan as necessary

o Performance Evaluation Board The Board is responsible for

o Conducting ongoing evaluations of contractor performance and making recommendations to the Fee Determining Official concerning award-fee

o Considering proposed changes in the Award-Fee Plan and recommending those that it determines are appropriate

o Performance Monitor Assign a performance monitor to each performance area which will be evaluated as part of the Award-Fee Plan

bull Performance Evaluation Criteria (FAR 16405-2(b)(2)) The plan should identify areas that will be evaluated and how they will be evaluated

o The number of evaluation criteria and requirements that they represent will differ widely among contracts

o The criteria and the rating plan should motivate the contractor to improve performance in the areas rated but not at the expense of at least minimum acceptable performance in all other areas Appendix A presents an example for a contract for shipyard support from DFARS Table 16-1 Performance Evaluation Crit

bull Performance Evaluation Report Format The plan should include a format for Performance Monitor evaluation of contractor performance Appendix B presents an example for shipyard support from

eria

DFARS Table 16-2 Contractor Performance Evaluation Report

142 Applying An Award-Fee Pricing Arrangement

Award-Fee Determination Process The award-fee determination is a subjective process that requires effective communication between all the parties involved The process begins with the Award-Fee Plan and the individual Performance Monitors and follows the general process described below The overall flow should be modified as necessary to meet agency requirements and the needs of each contracting situation

Step 1 Performance Monitor orientation

o Each Performance Monitor should be provided with the following documents

o A copy of the contract award-fee provisions o A copy of the Award-Fee Plan o A copy of specific instructions applicable to

Performance Monitor assigned areas of evaluation cognizance

o The Performance Evaluation Board Chairperson should conduct a discussion of the award-fee determination process in general and the

Performance Monitors responsibilities in particular

o The Performance Evaluation Board Chairperson should consider scheduling periodic meetings with Performance Monitors to discuss ongoing contractor performance general problems and solutions and other contractual issues

Step 2 Performance Monitors assess contractor performance throughout the performance period

Step 3 At the end of each evaluation period Performance Monitors submit Performance Management Reports to the Performance Evaluation Board Each report should conform to the requirements of the Award-Fee Plan

Step 4 The Performance Evaluation Board evaluates information obtained from the Performance Monitors and other available sources of information

o The Board may request contractor input concerning the reports provided by the Performance Monitors

o The Board may discuss any questions about the Performance Monitor Reports with the Performance Monitors For example a contractors shortcoming identified in a Performance Monitor Report may have been occasioned by Government influences and decisions to which the contractor responded at the expense of certain aspects of otherwise prescribed contract work Board members may be in a better position than the Performance Monitor to evaluate the contractors response

Step 5 The Board meets and summarizes preliminary findings and positions

Step 6 After it reaches its preliminary decision the Board meets with contractor top-management to provide a summary of its preliminary findings and position regarding the performance levels achieved in the areas evaluated

Step 7 After the conference with the contractor the Board should consider contractor input and if appropriate modify its preliminary findings and recommendations accordingly

Step 8 The Board Chairperson submits the Performance Evaluation Board Report to the Fee Determining Official

The Performance Evaluation Board Report should consider such matters as

o Recommended range of dollars within which the award-fee should fall

o Performance points assigned by the Board to each performance area and evaluation criterion if applicable

o Bases of the performance points assigned o Rationale for selecting the recommended award-fee

range

Step 9 The Fee Determining Official considers the recommendation of the Performance Evaluation Board and makes a decision regarding award-fee

That decision may or may not be in accord with the Performance Evaluation Board recommendation If it is not in accord with the Board recommendation the Fee Determining Official must assure that reasons for any differences are fully documented

Step 10 The Fee Determining Official sends the award-fee decision to the contractor

15 Structuring Fixed-Price Redeterminable Pricing Arrangements

Redeterminable Contract Types (FAR 16205 and 16206) There are two types of fixed-price contracts that provide for price redetermination without an incentive arrangement the fixed-price contract with prospective price redetermination (FPRP) and the fixed-ceiling-price contract with retroactive price redetermination (FPRR)

FPRP Description (FAR 16205-1) A FPRP contract provides for a firm fixed-price for an initial period of contract deliveries or performance and prospective price redetermination at a stated time or times during contract performance for subsequent periods It can probably be best described as a series of firm fixed-price contracts negotiated at stated times during performance

Situations for FPRP Contract Use (FAR 16205-2) You should consider an FPRP contract for acquisitions of quantity production or services for which you can negotiate a fair and reasonable firm fixed-price for the initial period but not for subsequent periods of contract performance In the DoD FPRP contracts are frequently used for aircraft engine acquisition where the nature of manufacture and resulting methods of accounting for costs lend themselves to periodic plant-wide pricing on a prospective basis

FPRP Elements (FAR 16205-2) The FPRP contracts have two key elements

bull Firm fixed-price for an initial period of contract deliveries or performance

bull Stated time or times for price redetermination

They generally also have a third element a ceiling price In negotiating a ceiling price you should consider the uncertainties involved in contract performance and their cost impact This ceiling should provide for assumption of a reasonable proportion of the risk by the contractor and once established may be adjusted only by operation of contract clauses providing for equitable price adjustment or other revision of the contract price under stated circumstances

FPRP Negotiation and Administration (FAR 16205-2 16205-3(c) and 52216-5) Consider the following points when you negotiate and administer an FPRP contract

bull The initial period for which the price is fixed at the time of contract negotiation should be the longest period for which it is possible to establish a fair and reasonable firm fixed-price

bull The length of the prospective pricing periods will depend on the circumstances of each contract but generally should be at least 12 months

bull The prospective pricing period(s) should conform with the operation of the contractors accounting system They can be described in terms of units delivered or as calendar periods but generally are defined to end on the last day of a month The first day of the succeeding period must be the effective date for the price redetermination

bull At a specified time before the end of each redetermination period prior to the last the contractor is required to submit

o Proposed prices for supplies or services to be delivered during the next succeeding period and

o An estimate and breakdown of the costs of these supplies or services in a format that meets the requirements of the law and applicable regulations

o Sufficient data to support the accuracy and reliability of this estimate and

o An explanation of the differences between this estimate and the original (or last preceding) estimate for the same supplies or services

o A statement of all contract costs incurred through the end of the first month (or second if necessary to achieve compatibility with the contractors accounting system) before submission of the proposed prices

o The data must be sufficient to disclose unit cost and cost trends for

Supplies delivered and services performed and

Inventories of work in process and undelivered contract supplies on hand (estimated to the extent necessary)

o The data format must meet the requirements of the contract the law and applicable regulations

bull The contractor must also submit (to the extent that it becomes available before negotiations on price redetermination are concluded)

o Supplemental statements of costs incurred after proposal submission and

o Any other relevant data that you may reasonably require

bull If the contractor fails to submit the data required within the time periods specified the contracting officer may suspend contract payments until the data are submitted If it is later determined that the Government overpaid the contractor the contractor must repay the Government immediately Unless repaid within 30 days after the end of the data submittal period the amount of the excess must bear interest - computed from the date the data were due to the date of repayment - at the rate established in accordance with the Interest clause of the contract

bull Upon receipt of the data required negotiate to redetermine fair and reasonable prices for the supplies and services that may be delivered in the period following the effective date of the price redetermination

bull Formalize each price redetermination in a bilateral contract modification

bull Pending execution of the bilateral contract modification the contractor will submit invoices or vouchers in accordance with the billing prices established in the contract

o If at any time it appears that the then-current billing prices will be substantially different than the estimated prices negotiate an appropriate change in the billing price

o Any billing rate adjustment must be reflected in a contract modification but it must not affect price redetermination

o After price redetermination adjust the total amount paid or to be paid on all invoices or vouchers to the agreed-upon price Assure that any required payments or refunds are made promptly

bull If you and the Contractor fail to agree on redetermined prices for any price redetermination period within 60 days (or within such other period as the parties agree) after the date on which the above data are to be submitted the contracting officer must promptly issue a decision in accordance with the Disputes clause If the contractor fails to appeal this decision must be treated as an executed contract modification unless modified by agreement with the contractor

bull Quarterly -- during periods for which prices have not been established costs have been incurred and adjusted billing prices exceed the existing contract price -- the contractor must submit cumulative data showing

o Total contract price for all supplies and services delivered and accepted by the Government for which final prices have been established

o Total costs (estimated to the extent necessary) for supplies and services delivered and accepted by the Government for which prices have not been established

o Interim profit for supplies and services delivered and accepted by the Government for which prices have not been established

o The total amount of all invoices or vouchers for supplies or services delivered and accepted by the Government

FPRR Description (FAR 16206-1) An FPRR contract provides for a fixed ceiling price and retroactive price redetermination within the ceiling price after contract completion

Situations for FPRPR Contract Use (FAR 16206-2 and 16206-3) A FPRR contract is appropriate for research and development contracts estimated at $100000 or less when you establish at the outset that a fair and reasonable contract cannot be negotiated and that the amount involved and short performance period make the use of any other fixed-price contract impractical Before use obtain approval from the head of the contracting activity (or the higher level official designed by your agency)

FPRR Elements (FAR 16206-2 and 16206-3) The FPRR contract has three key elements

bull Ceiling price negotiated for the contract at a level that reflects a reasonable sharing of risk by the contractor The established ceiling price may be adjusted only if required by the operation of contract clauses providing for equitable price adjustment or other revision of the contract price under stated circumstances

bull Billing price that is fair and reasonable as circumstances permit The billing price may be adjusted during contract performance if circumstances warrant Any billing price adjustment must be reflected in a contract modification and must not be the final price redetermination

bull Agreement to promptly negotiate a fair and reasonable price after contract completion

FPRR Negotiation and Administration (FAR 16206-3(d) and 52216-6) Contract requirements are similar to those for an FPRP contract except that price is not redetermined until all items are delivered However you should consider two additional points as you negotiate and administer an FPRR contract

When you negotiate the contract you should emphasize the importance of management effectiveness and ingenuity in contract performance will be considered during final pricing This emphasis is important because this contract type does not provide the contractor with a calculable incentive for effective cost control aside from the cost ceiling

bull Within a specified number of days after delivery of supplies or services the contractor is required to submit

o Proposed prices o A statement of all costs incurred during contract

performance The data format must meet the requirements of the contract the law and applicable regulations


bull When you negotiate the redetermined contract price you should give weight to the management effectiveness and ingenuity exhibited by the contractor during performance

Appendix 1A Performance Evaluation Criteria

Submarginal

Marginal Good Very Good Excellent

A-1

Adherence to Plan Schedule

Consistently late on 20 of plans

Late on 10 plans wo prior agreement

Occasional plan late wo justification

Meets plan schedule

Delivers all plans on schedule amp meets prod change requirements on schedule

A-2

Action on Anticipated

Delays

Does not expose changes or resolve them as soon as recognized

Exposes changes but is dilatory in resolution on plans

Anticipates changes advises Shipyard but misses completion of design plans 10

Keeps Shipyard posted on delays resolves independently on plans

Anticipates in good time advises Shipyard resolves independently and meets production schedule

A

Time of Delivery

A-3

Plan Maintenance

Does not complete interrelated systems studies concurrently

Systems studies completed but constr plan changes delayed

Major work plans coordinated in time to meet product schedules

Design changes from studies and inter-related plans

Design changes studies resolved and test data issued ahead of production

issued in time to meet product schedules

requirements

B-1

Work Appearance

25 dwgs not compatible with Shipyard repro processes and use

20 not compatible with Shipyard repro processes and use


0 dwgs prepared by design agent not compatible with Shipyard repro processes and use

0 dwgs presented include design agent vendors subcontr not compatible with Shipyard repro processes and use

B-2

Thoroughness and Accuracy

of Work

Is brief on plans tending to leave questionable situations for Shipyard to resolve

Has followed guidance type and standard dwgs

Has followed guidance type and standard dwgs questioning and resolving doubtful areas

Work complete with notes and thorough explanations for anticipated questionable areas

Work of highest caliber incorporating all pertinent data required including related activities

B

Quality of Work

B-3

Engineering Competence

Tendency to follow past practice with no variation to meet requirements job in hand

Adequate engrg to use amp adapt existing designs to suit job on hand for routine work

Engineered to satisfy specs guidance plans and material provided

Displays excellent knowledge of constr reqmts considering systems aspect cost shop capabilities and procurement problems

Exceptional knowledge of Naval ship work amp adaptability to work process incorporating knowledge of future planning in Design

B

Quality of Work (continu

ed)

B-4

Liaison Effectiveness

Indifferent to requirements of associated activities related systems and Shipyard advice

Satisfactory but dependent on Shipyard to force resolution of problems without constructive recommendations to subcontr or vendors

Maintains normal contact with associated activities depending on Shipyard for problems requiring military resolution

Maintains independent contact with all associated activities keeping them informed to produce compatible design with little assistance for Yard

Maintain expert contact keeping Shipyard informed obtaining info from equip supplies wo prompting by Shipyard

B-5

Independence and

Initiative

Constant surveillance reqd to keep job from slipping

Requires occasional prodding to stay on schedule amp expects Shipyard resolution of most problems

Normal interest and desire to provide workable plans with average assistance amp direction by Shipyard

Complete amp accurate job Free of incompatibilities with little or no direction by Shipyard

Develops complete and accurate plans seeks and resolves with assoc act ahead of schedule

C-1

Utilization of Personnel

Planning of work left to designers on drafting boards

Supervision sets amp reviews goals for designers

System planning by supervisory personnel studies checked by engineers

Design parameters established by system engineers amp held in design plans

Mods to design plans limited to less than 5 as result lack engrg system correlation

C-2

Control Direct Charges (except Labor)

Expenditures not controlled for services

Expenditures reviewed occasionally by supervision

Direct charges set amp accounted for on each work package

Provides services as part of normal design function w extra charges

No cost overruns on original estimates absorbs service demands by Shipyard

C

Effectiveness in Controll

ing andor Reducing Costs

C-3

Performance to Cost Estimate

Does not meet cost estimate for original work or changes 30 of the time


Exceeds original est on change orders 5 time


Never exceeds estimates of original package or change orders

Appendix 1B Contractor Performance Evaluation Report

Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____

Contract Number ________________

Contractor ______________________

Date of Report ___________________

PNS Technical Monitors____________

________________________________

Category

Criteria

Rating Item

FactorEvaluation

Rating Category Factor

Efficiency Rating

Time of Delivery

A-1 Adherence to Plan Schedule

_______ x 40 = __________

A-2 Action on Anticipated Delays

_______ x 30 = __________

A

A-3 Plan Maintenance

_______ x 30 = __________

Total Item Weighted Rating ___________ x

30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________

B-2 Thoroughness and Accuracy of Work

_______ x 30 = __________

B-3 Engineering Competence

_______ x 20 = __________

B-4 Liaison Effectiveness

_______ x 15 = __________

B

B-5 Independence and Initiative

_______ x 20 = __________


x 40 = _________

Effectiveness in Controlling andor Reducing Costs

C-1 Utilization of Personnel

_______ x 30 = __________

C-2 Control of All Direct Charges Other than Labor

_______ x 30 = __________

C

C-3 Performance to Cost Estimate

_______ x 40 = __________


x 30 = _________

Total Weighted Rating

____________________________

Rated by _________________________________________

Signature _________________________________________

Note Provide supporting data andor justification for below average or outstanding item ratings

contract risk incentives for contractor performance and other factors such as the adequacy of the contractors accounting system Your objective should be to select a contract type that will result in reasonable contractor risk with the greatest incentive for efficient and economical contract performance Selecting the proper contract type will make the work more attractive to more potential offerors thereby increasing competition

As you match contract type to contract risk consider the following

bull Identify available contract types bull Consider acquisition method bull Consider commerciality of the requirement bull Consider cost risk associated with the contract

action bull Consider appropriate performance incentives bull Consider the accounting system adequacy and bull Document the selection decision

Identify Available Contract Types The table on the following pages compares the most common compensation arrangements Most of those arrangements fit into two general categories fixed-price and cost-reimbursement but labor-hour and time-and-materials contracts have characteristics of both

bull Fixed-Price (FAR Subpart 162) Under a fixed-price contract the contractor agrees to deliver the product or service required at a price not in excess of the agreed-to maximum Fixed-price contracts should be used when the contract risk is relatively low or defined within acceptable limits and the contractor and the Government can reasonably agree on a maximum price Contract types in this category include

o Firm fixed-price (FFP) o Fixed-price economic price adjustment (FPEPA) o Fixed-price award-fee (FPAF) o Fixed-price incentive firm (FPIF) o Fixed-price incentive with successive targets

(FPIS) o Fixed-price contract with prospective price

redetermination (FPRP) o Fixed-ceiling-price contract with retroactive

price redetermination (FPRR)











Firm (FPIF)
















well-defined












Established prices



A ceiling price

Target cost

Target profit



A firm fixed-price





















Typical Application








Must be justified


Must be negotiated



Successive Targets








Time amp

Materials (TampM)


















Target cost




Target cost

Fixed fee

Target cost


No fee

A ceiling price













Research study








Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________












Firm (FPIF)
















well-defined












Established prices



A ceiling price

Target cost

Target profit



A firm fixed-price





















Typical Application








Must be justified


Must be negotiated



Successive Targets








Time amp

Materials (TampM)


















Target cost




Target cost

Fixed fee

Target cost


No fee

A ceiling price













Research study








Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


well-defined












Established prices



A ceiling price

Target cost

Target profit



A firm fixed-price





















Typical Application








Must be justified


Must be negotiated



Successive Targets








Time amp

Materials (TampM)


















Target cost




Target cost

Fixed fee

Target cost


No fee

A ceiling price













Research study








Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________





Typical Application








Must be justified


Must be negotiated



Successive Targets








Time amp

Materials (TampM)


















Target cost




Target cost

Fixed fee

Target cost


No fee

A ceiling price













Research study








Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________












Target cost




Target cost

Fixed fee

Target cost


No fee

A ceiling price













Research study








Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________






Labor Hour (LH)



























Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________




















Production Stages


Research


Test

Demonstration


Full Production


Contract Type


FFP FPIF or FPEPA

FFP FPIF or FPEPA















































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________














































Products)
































Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________















Then











Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________








Then








































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________
































Where
















































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________










































bull




Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


Target Cost

Target Profit


Price Ceiling

Target Cost

Target Fee


Minimum Fee

Maximum Fee








SGSC

Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


Where


















Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________









Where




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________




CT = Target cost



SGU = 100 - SCU

Where






Where




CT = Target cost



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



SGO = 100 - SCO

Where






Element


(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

ProfitFee

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$320000

$600000

$380000

$1300000

$10000

$1310000


o Contractor share

o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


o Government share



o Contractor share

o Government share











Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________










Element

Optimistic

Most Likely

(Target)

Pessimistic


Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



Direct Labor Cost

Indirect Cost

Total Cost

Fee

Total Price

$250000

$320000

$230000

$800000

$120000

$920000

$300000

$400000

$300000

$1000000

$70000

$1070000

$350000

$600000

$450000

$1400000

$20000

$1420000





o Contractor share

o Government share



o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


o Contractor Share

o Government Share








Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



Target Fee $70000



Maximum Fee $120000

Minimum Fee $20000



Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


Optimistic Cost

Pessimistic Cost

Where


CT = Target cost

PT = Target fee



Where


CT = Target cost

PT = Target fee











Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________






Element

Optimistic

Most Likely

(Target)


Direct Labor Cost

Indirect Cost

Total Cost

Profit

Total Price

$250000

$320000

$230000

$800000

$150000

$950000

$300000

$400000

$300000

$1000000

$100000

$1100000

$350000

$500000

$450000

$1300000

$25000

$1325000





o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________






o Contractor share

o Government share



o Contractor Share

o Government Share
















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________

















Where



CT = Target cost

CF = Final cost


Where

PF = Final Profit

PT = Target Profit



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



Where

KF = Final price

CF = Final cost

PF = Final profit




















































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________












































































eria
























range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________

















range
























































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



















































Submarginal


A-1





Meets plan schedule


A-2


Delays






A

Time of Delivery

A-3

Plan Maintenance







requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



requirements

B-1

Work Appearance






B-2


of Work






B

Quality of Work

B-3







B


ed)

B-4







B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


B-5

Independence and

Initiative






C-1







C-2







C



C-3








Ratings

Excellent

Very Good

Good

Marginal

Submarginal

Period of _______________19_____


Contractor ______________________

Date of Report ___________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


________________________________

Category

Criteria

Rating Item

FactorEvaluation


Efficiency Rating

Time of Delivery


_______ x 40 = __________


_______ x 30 = __________

A


_______ x 30 = __________


30 = _________

Quality of Work

B-1 Work Appearance

_______ x 15 = __________


_______ x 30 = __________


_______ x 20 = __________


_______ x 15 = __________

B


_______ x 20 = __________


x 40 = _________



_______ x 30 = __________


_______ x 30 = __________

C


_______ x 40 = __________


x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________



x 30 = _________


____________________________

Rated by _________________________________________

Signature _________________________________________


Ch 1 - Establishing And Monitoring Contract Type · Ch 1 - Establishing And Monitoring Contract...

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Transcript of Ch 1 - Establishing And Monitoring Contract Type · Ch 1 - Establishing And Monitoring Contract...